In order to sustain the protocol with ample resources to upkeep liquidity, risk-free value, hedging against inflation & provide funds to the investment fund, we've included taxes into our protocol.
You're taxed every time you buy, sell or transfer your SPHERE tokens.
The stock taxes are as follows:
- 13% buy/transfer tax
- 20-25% sell tax (we've added the option of increasing the sell tax to 25%, which will be increased or decreased back to 20% if the community wants it)
The stock taxes are always fixed to one destination, in fixed amounts.
For buying & selling:
- 3% - 5% will go towards the investment treasury which will be used to acquire more governance, buy into a variety of different cross-chain endeavors, fund OTC deals with projects to acquire large sums of appreciating assets at a discount & high risk degen plays. All of the following will fund the protocol in the long run.
- 5% on the LP to ensure ample liquidity when buying or selling.
- 5%-10% Risk-Free Value, which will hedge against volatility in the market to ensure stability in price of SPHERE.
While taxing the protocol at a fixed amount has an effect on sell pressure, a lot of whales in the protocol can afford to lose some of their tokens when doing price manipulation. This causes the protocol to have massive price volatility which whales use to shake off retail to buy a bigger share in the treasury. This causes the protocol to not only become unsustainable, but also unfriendly to the average investor, who makes the core of every project. To mitigate this problem, we've implemented the Dynamic Tax.
Dynamic taxes are an innovative concept created by the Sphere Team, which aims to minimize price manipulation by taxing sales/wallet transfers additionally based on how big of a share the holder has in correlation to the LP of SPHERE. This means that somebody with a lot of tokens in the ecosystem cannot dump the market without leaving a share of it in the hands of the community, making future attempts harder and harder. How many SPHERE tokens you hold is taken into account when calculating how big of a share of the LP you hold. For every 1% that you hold, the tax is increased by 5% until there's a total sell tax of 70%.
A simple calculation:
- 1% of LP - 5% tax
- 2% of LP - 10% tax
- 3% of LP - 15% tax
- 4% of LP - 20% tax
- so on and so forth.
This tax does not affect the ordinary buyer because of the sheer volume of LP one would need to have to make such a share possible.
Previous rebase tokens have been repeatedly manipulated, leaving the rest of the community with losses that cannot be recovered through simple staking. We're dealing with the APY issue through taxes. We believe that, whereas the other protocols believed that blacklisting had valid justification, we do not intend to do so. So, thanks to the concept, we're adding on top of taxing entry and exits by innovating the mechanic by creating tax brackets to reduce the frequency of these problems.